How to Change Your Bad Financial Habits into Good Ones

Are you guilty of a few bad financial habits? If so, you’re not alone. Smarter money habits can have a positive effect on different areas of your personal finances. Right now, it might be challenging to save an emergency fund, and you may never have enough cash to pay bills. But if you can change your bad money habits into good ones, you can potentially improve your finances.

1. Learn how to identify any bad money habits

You need to identify your bad financial habits before you can change them into good ones. There are several ways to do this. Some people track their spending for a week or month to see where their extra money goes. In most cases, they discover a pattern of spending money unnecessarily on things they don’t really need, such as excessive entertainment or dining out. Talk with a trusted friend or your spouse to get their opinions on your bad money habits. You can also read articles on the subject to identify bad patterns, or work with a financial planner.

2. Know your triggers

For every bad financial habit, there’s a trigger. And it’s important that you understand your individual triggers if you want to improve your situation. For example, if you have a bad habit of impulse shopping, going to the mall or browsing retailers online might be a trigger. Or if you have a friend who’s a shopaholic, being in the company of this person for too long a period might trigger an urge to spend. If you can identify your triggers, you can create a plan to avoid these triggers. For example, if you have to buy something, you might leave your credit card at home, and only bring enough cash to complete the purchase.

3. Replace bad habits with good ones

Now that you’ve identified your bad money habits -- and you know the triggers -- you have to replace these bad habits with good ones. For every negative financial habit, there’s a positive habit. If your bad habit is buying coffee and lunch every day, start a new habit of bringing your own to work. This simple move can save $25 a week or $100 a month. Or if you have a bad habit of waiting until the last minute to pay bills, and you often pay late because the due date slips your mind, start a new habit of paying statements as soon as they arrive, or setting up automatic bill pay with your bank.

4. Work on one habit at a time

If you have several bad financial habits, don’t overwhelm yourself by trying to work on each habit simultaneously. If you think you can handle tackling all your bad habits at one time – go for it. But if you need to take baby steps, that’s okay too.

Additionally, tell others about your determination to quit a bad financial habit. This way, you’re accountable to someone, such as a parent, a sibling or your spouse. Work on this habit for 30 days before moving onto the next bad habit. But if you feel that you’ve overcome a bad habit sooner, feel free to start tackling your next bad habit.

Bad financial habits can leave you broke, but you can improve your situation. Identify your bad financial habits, create a doable plan, and you can become more financially savvy.

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